The leaders of the two biggest Palestinian parties met in Cairo on Thanksgiving, and just going by the headlines afterward, you’d have thought nothing had happened. “Palestinians talk unity, no sign of progress,” said Reuters. AP: “Palestinian rivals talk, but fail to resolve rifts.” But read the stories, and it becomes clear that a great deal is going on, with immense implications for the future of peace talks with Israel.

Israel’s government dismissed the meeting with a wave of the terrorist card. Hamas is regarded by the West and Israel as first and foremost a terrorist organization, and so Mark Regev, who speaks for prime minister Benjamin Netanyahu, framed the reconciliation as something that can only contaminate the pacifist credentials of Palestinian Authority president Mahmoud Abbas, the Fatah party chief widely known as Abu Mazen:

But what if Abbas is holding still, and Hamas is moving closer to Abbas? That’s what’s been happening, from nearly all appearances, for the last two or three years, and everything coming out of the Cairo meeting points in the same direction. The head of Hamas, Khaled Meshaal, and Abbas spoke for two hours, Abbas in the big chair, Meshaal on the couch with two others. Afterwards both met the cameras smiling. “There are no differences between us now,” Abbas said. Mashaal went with: “We have opened a new page of partnership.” And on whose terms? Hamas stands for resistance, its formal name being the Islamic Resistance Movement. But in the Gaza Strip where it governs, Hamas has largely enforced a truce with Israel since January 2009. And in Cairo it signed a paper committing itself to “popular resistance” against the Israeli occupation of Palestinian territories. That’s “popular” in contrast to “violent” or “military” resistance. We’re talking marches here. Chanting and signs, not booby traps or suicide bombs.

“Every people has the right to fight against occupation in every way, with weapons or otherwise. But at the moment, we want to cooperate with the popular resistance,” Meshaal told AFP. “We believe in armed resistance but popular resistance is a program which is common to all the factions.”

What’s going on here? For one thing, Abbas appears to have coaxed his party’s militant rival into his fold. “”This is my assessment,” says Omar Shaban, the Gaza economist and civil society leader who runs Pal-Think, a think tank. “Abu Mazen has succeeded in bringing them one step closer to his program. I think the election will be the real test for the whole process.”

And how. Hamas and Fatah, factions that four years ago were engaged in civil war as Hamas’s militia drove Fatah’s militia out of Gaza, now live in fear not of each other, but of the Palestinian people. The Arab Spring has transformed the political dynamic — something Meshaal said out loud to AFP. Both Fatah and Hamas know they are disappointments to the people. The least they can do is stop fighting each other, the foremost demand of the public, and the reason both leaders emerged from their closed meeting saying, in so many words, “Look! Look! We really are reconciling! Just as we promised!” If Hamas needed any extra incentive, it’s available in the excruciating collapse of Syria, where Meshaal keeps his office. If Fatah needed any extra incentive, it’s available in the UN Security Council report on the application for Palestinian statehood, which noted that the applicant, Abbas’ Palestinian Authority, does not even control the Gaza Strip, surely a minimum requirement of sovereignty.

Actual reunification of the West Bank and Gaza will come with the unity government of technocrats the two factions promised in May, when their reconciliation was formally declared. That placeholder government still has yet to be announced — placeholder, that is, pending spring 2012 elections that produce a new legislature and president — but at last there’s evidence of progress. The point of conflict had been who would serve as prime minister. Fatah insisted on Salam Fayyad, a favorite of the West and a technocrat’s technocrat who has held the job on the West Bank for four years. Hamas wanted Fayyad out. A couple of week ago, after months of stalemate, he agreed to go. But neither side is rushing him because he remains the West’s trusted conduit for hundreds of millions in foreign aid. That aid covers the salaries of government workers both in the West Bank and Gaza — where Fatah continues to pay 70,000 employees even though Hamas controls the government. The PA has by far the biggest payroll in the Palestinian territories, a donor economy if ever there was one. And however they may differ on Fayyad, both Fatah and Hamas want to see people get paid, because, again, who do they fear most?

Quite possibly biggest news out of Cairo was deep in the fine print: Efforts are under way to bring Hamas into the PLO, or Palestine Liberation Organization, the umbrella for all Palestinian factions. The PLO is the one “brand” that still resonates with ordinary Palestinians, and Hamas has wanted to join it since at least 2005. If Hamas finally gets in, the implications would appear to be immense. It would mean agreeing to the positions and agreements the PLO has already made. This includes recognizing Israel, and renouncing terror — two things Hamas has never been willing to do. “Yes, when they are in they have to agree to the political program of the PLO,” says Shaban. “This will take time.” But should it occur, it would complete Hamas’ move toward the center, and open the door to the international recognition craved by many in the organization.

The biggest question out of Cairo was what the PLO will look like in a few months. An effort to “reform” the body was announced along with the move to bring Hamas on board. The first meeting was set for Dec. 22. Reform is something Palestinian analysts call overdue, citing the elderly — some say “sclerotic” — composition of the PLO’s executive committee. But it makes for yet one more piece to watch on a chess board where the pieces are moving as quickly as events. The meeting, after all, was in Cairo.

Karl Vick has been TIME's Jerusalem bureau chief since 2010, covering Israel,the Palestine territories and nearby sovereignties. He worked 16 years at the Washington Post in Nairobi, Istanbul, Baghdad, Los Angeles and Rockville, MD.